The United States has more electrical grid blackouts than any other developed nation. According to the Department of Energy, demand for electricity has outpaced transmission rates by 25% every year since 1982. Federal data also shows that power outages lasting more than an hour have steadily increased in the last decade.

There are many risks with the current grid. A smart grid — a modernized, technical grid that uses renewable energy — has emerged as the attractive alternative for the future, but it will cost more than $300 billion to implement, according to some experts. The DoE promotes its master “smart grid” plan, but no one should expect a giant smart grid to appear any time soon.

A more reasonable plan involves microgrids, which have emerged as a popular solution as people have taken solar and other clean energy generation into their own hands. Microgrids allow communities, institutions, or individuals to power smaller communities and decentralize power from utility providers. According to Navigant Research, the microgrid market will reach $20 billion by 2020, up from $4.3 billion in 2013.

“Microgrids are democratizing power — cities today are realizing that they need to provide the power to the people, who want to choose their electricity supply, and choose their provider. You never had this option before,” said Arjun Gupta, a system design engineer at Urban Green Energy, which provides renewable energy solutions for commercial clients around the world and works on projects in the microgrid space.

Here are five main takeaways from a conversation with Gupta about UGE’s extensive microgrid research, and a look at the overall landscape of microgrids at this point in time.

1. There are several effective types of microgrids

UGE has done a lot of research to look into possible situations for microgrids, and the company has found three of the most promising microgrid markets, according to Gupta.

  • Telecoms towers: These work in remote locations where microgrids can provide consistent power to base stations. For example, Gupta said UGE was able to design a small microgrid system for a cell tower on a remote island in New Caledonia in the South Pacific, which can only be accessed by a helicopter.
  • Single buildings: This could work especially well for civic facilities like hospitals, schools, and fire stations, which can be used to produce energy during times of disaster. “We saw this in action during Hurricane Sandy, when NYU and Princeton (who have [small] microgrid systems) were able to provide power while the rest of the grid was down,” Gupta said.
  • Communities: This is mostly in developing countries with remote locations, where a microgrid can provide about 100 households with all the energy they need throughout the day. A solar energy system with batteries could provide electricity for 50 households in a remote village.

Every place is different, so the microgrid applications for off-grid, grid-secure, and grid-poor markets must be customized. According to Greentech Media Research, remote locations in the US like military bases used to build coal plants because they had no other option. Now, however, they are turning towards solar photovoltaic or wind systems to power their base stations. In doing this they are creating their own microgrid.

2. Hybrid versions will be common

Further research from Navigant showed that the microgrid system — which includes diesel and gas generators, solar PV power, wind power, storage systems, and fuel cells — will grow by $5.5 billion annually until 2023.

Those gas generators are mentioned because building a new grid is no easy feat. Hybrid models will continue to be attractive until the cost of renewable energy is much lower and access is more widespread, similar to the way hybrid vehicles (like the Toyota Prius) are good stepping stones until electric vehicles drop in price.

“We frequently design hybrid microgrids — which involve some combination of solar, wind, the utility grid, diesel generators, and energy storage. These types of microgrids are more difficult to design and deploy but they have significant return on investment, and can be designed based on the user’s needs,” Gupta said.

3. Microgrids are reliant on battery storage development

Energy storage has been the key issue with renewables thus far. Today, there is plenty of talk about what type of battery may best work for storage, but none that have really taken hold in the market yet. According to Greentech Media Research’s Deployment Tracker, a third of microgrids now include electrical energy storage. Almost all of that was put into operation between 2011 and 2014.

This presents a window of opportunity for storage companies, and it’s becoming a race to see who can figure it out fastest, as the utility industry has worked in the past.

4. There are many challenges to microgrids

Gupta outlined a few of the challenges to microgrids that he sees in his research:

  • Interconnection: Most utilities in connected areas don’t want microgrids connected to them because it would pose problems for the central grid. Microgrids take away their business, and can cause instability in aging grids.
  • Cost and financing: This has always been a challenge with renewable energy transmission and storage, which is one of the main reasons it hasn’t caught on, in addition to the differences in these costs vs. traditional fossil fuel costs. However, new structures and regulations are improving the development of microgrids.
  • State level planning: Microgrid adoption will start at the state level, and hinging on states’ relationships with utility providers. Planners must figure out how to distribute, store, and maintain energy systems, and that will require state-by-state regulations.

5. Society is ready for microgrids

There is dynamic growth in the microgrid industry, made only more prominent by community solar projects, crowdfunding campaigns, more frequent blackouts, and the overall acceptance of resource scarcity and a rapidly changing climate.

Some utility providers are becoming less reluctant, as well. For example, Germany’s utilities changed their business models and provided microgrids, instead of having to face criticism for not allowing them; and in the aftermath of Hurricane Sandy, New York has been looking at their energy policies to find the best ways to move forward and increase the resiliency of energy.

There is also a lot of excitement over decentralizing power. Throughout our history, the US has had one central utility with a monopoly on electricity, but that is changing, quickly. What’s more is electricity prices are always increasing, so renewable energy technology is now achieving “grid parity” in certain places.

“The infrastructure of our power plants is aging, the price of coal is increasing, and the grid just isn’t as reliable as it used to be,” Gupta said. “Especially in the developed world, the microgrid idea is catching on very quickly because it offers a chance to develop stronger infrastructure and utilize smart-grid technologies to make the grid more responsive and flexible, which seems like a natural choice as we work towards a better energy future.”

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